A Look Inside a Hard Discounter
When gas prices soar, most consumers have to reduce their spending on other things. If they could buy a $3.50 box of cereal for $1.39 or a $2.99 package of tomatoes for $0.99, and get the same or better quality, the supermarket might be the easiest place to start for frugal consumers. Some consumers don't have the skill to evaluate products of different prices, simply choosing higher-priced items on the assumption that higher price means higher quality. Other households have enough discretionary income that price increases for gasoline don't affect the purchase of other items. This is the environment for a food fight—the battle for consumers' food dollars. The stakes are high because all consumers must eat. Some retailers, such as Whole Foods, Wild Oats Market, and The Fresh Market stake out a "lifestyle" or "quality" position with niche-oriented strategies appealing to consumers who value gourmet, organic, and specialty products. Others compete on location or convenience, such as Kroger, Publix, and Albertsons, with neighborhood locations across the country. Last, some compete on price, with Wal*Mart looming as the ten-ton gorilla in this arena. A rising star in the battle to appeal to frugal consumers, however, is Aldi. Traditional grocery retailers are caught in the shrinking middle of the market, which some consumer analysts see as an unsustainable strategy, outflanked by competitors at polar ends of consumer demand. Kroger, Albertsons, Safeway, and others tackle the price issue with promotional programs while also offering a differentiated shopping experience. For Cincinnati-based Kroger, the nation's number-two grocery retailer, the tagline is "Right Store, Right Price." Boise-based Albertsons, with 2,500 stores, tells consumers it "Helps make your life easier," but it has also invested heavily in a shelf tag program dubbed "Compare." Consumers may be asking, "Can the nicest stores in town really have low prices?" Low...
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